Military Renewables Plan: A Bioenergy Booster
Federal law requires that the Department of Defense purchase 25 percent of its energy from renewable resources by 2025. Presently, the Army obtains just 2 percent of its electricity from renewable energy technologies. Biomass electric and thermal generation facilities are explicitly included in the statutory definition of renewable resources.
In response to these requirements, the U.S. Army recently issued a request for information seeking public comment on a draft solicitation to procure up to $7 billion in large-scale renewable and alternative energy on or near Army land. These projects will be financed, constructed, operated and maintained by private contractors using long-term offtake agreements. Biomass is an eligible resource under the solicitation.
The finalized solicitation should be issued shortly and will likely contemplate multiple indefinite delivery / indefinite quantity contracts with qualified offerors. Individual task orders will then be competitively awarded under these contracts for specific renewable energy projects of varying sizes and technologies up to the budgeted $7 billion in project value. The Army plans to purchase electric energy from the projects, but will not own the generation assets.
The draft solicitation, and similar efforts across the Department of Defense, are being undertaken to meet Congressional mandates and other military objectives, including energy independence and security, and supply chain simplification. These efforts also will serve the Army’s net zero objectives for U.S. installations. Net zero energy installations are defined as projects that produce as much renewable energy on site as they use on an annual basis, and may include conservation and efficiency efforts in addition to renewable energy generation.
The Army previously satisfied its renewable energy mandates by purchasing renewable energy certificates or clean energy generated offsite. Biomass projects that convert waste to fuel and generate heat or power from those fuels will assist the Army in achieving its renewable energy mandates and net zero objectives. Biomass facilities also are an important component of a renewable energy portfolio for the military because the power is not generated intermittently, as is the case with wind and solar facilities.
Two complementary trends are aligning to potentially benefit biomass projects near military installations. First, market observers estimate that 40,000 to 60,000 MW of existing coal-fired capacity will be retired or mothballed by 2020. Much of that lost coal capacity will likely be replaced by new gas-fired generation, which is not a renewable energy resource and has a significant carbon footprint. By contrast, biomass facilities can serve the military’s renewable energy and energy security objectives and already qualify as renewable energy technologies under some state renewable portfolio standards.
Second, biomass projects developed as part of the U.S. Army or Department of Defense’s efforts will benefit from the Department of Defense’s willingness to enter into long-term offtake contracts, which facilitate project financing and are increasingly difficult to obtain because of ongoing litigation regarding the ability of electricity buyers to subsidize capacity payments under long-term contracts.
The Army’s initiative (and other Department of Defense efforts) is being implemented from both the top down and the bottom up. Base commanders will have significant input on the procurement and selection process, while the Pentagon brass continue to establish policy directives that will be implemented in contracts to be negotiated and administered by the Army Corps of Engineers. Additional information about the Army’s renewable energy efforts is available at the Army Energy Initiatives Task Force website (www.armyeitf.com). It is expected that information on the solicitation, when final, will be posted to the website.
Biomass projects, especially those using waste streams from military installations, will benefit from their ability to simultaneously meet several of the military’s objectives, including increased clean energy production, energy independence, net zero facility goals, and supply chain simplification. Because biomass qualifies as a renewable energy resource under the Army’s program as well as state renewable portfolio standards, the military’s multi-billion dollar initiative to expand its use of onsite renewable energy presents a significant new opportunity for biomass project developers.
Authors: Roger Stark
Partner, Ballard Spahr, LLP
Partner, Ballard Spahr, LLP
Associate, Ballard Spahr, LLP